Is now the time to invest in Indianapolis?

11 Replies

Hello there. I have sold a vacation property of mine in Southern California, it was bought in cash almost 10 years ago. It was a property I haven’t been using much for the last 3 years. I live in a neighboring state now.

HOA dues and Taxes in California were just wiping me out. Even if I had rented that house out it would only make me about 1/3 of what that money could make me if it were deployed somewhere in the Midwest.

I’ve chosen Indianapolis because I know people there, I’m familiar with it’s areas, in some way.

My question is: Is now a good time to invest in Indianapolis?

I'm 31 years old now. I have experience in real estate from my parents, they've been playing this game forever, way before I was born. I was only able to buy my properties in California thanks to my trust that they've set up for me. But after a long time living a life of not adding anything but spending everything I've decided that it's time to be more practical.

I’ve decided that I will be selling every property that I’ve bought in the last 10 years that is either not making me money, or that is making me less than it could.

I’ve been researching the Indianapolis area and I love the potential. It seems like an assured success. Of course there are some details on where to buy, like almost every other market.

But is now the time? With the pandemic’s second wave just starting now, with businesses both small and large struggling under the pressures of lockdowns, with people losing their jobs left and right. Is this the time or should I wait just another year? Maybe even more than a year since experts are saying that the economy will take a while to heal.

It’s sad what’s happening to our economy. It’s sad what’s happening to hardworking American families that are losing their jobs. But as a real estate investor I cannot have my tenants not pay rent due to loss of job and income caused by the pandemic. And not being able to evict them. So, is now a good time to invest? Or should I wait a year or a year and half to start investing in the Indianapolis real estate market?

I was thinking of waiting as so many large corporations keep announcing layoffs in the dozens of thousands. Some of those people who are being laid off could be my tenants, and they could have no way to pay me. And though it’s sad what’s happening to them, I cannot just have people living in my properties for free indefinitely.

@Danny R. Personally, I would not wait. Prices continue to go up in Indianapolis which will push returns down. You can always find some reason to wait but we're now 7 mths in to the pandemic and have seen minimal effects on real estate. Median home prices are up 11.5% year to date and 16.9% in September YOY. There is less than 1 month of supply of inventory so prices will continue to rise for the unseen future. Indianapolis has a strong, diverse economy. Since the pandemic, their unemployment rate is lower than the national average. They have lost fewer jobs than any other popular investment market shown by the chart below.

Originally posted by @Mike D'Arrigo :

@Danny R. Personally, I would not wait. Prices continue to go up in Indianapolis which will push returns down. You can always find some reason to wait but we're now 7 mths in to the pandemic and have seen minimal effects on real estate. Median home prices are up 11.5% year to date and 16.9% in September YOY. There is less than 1 month of supply of inventory so prices will continue to rise for the unseen future. Indianapolis has a strong, diverse economy. Since the pandemic, their unemployment rate is lower than the national average. They have lost fewer jobs than any other popular investment market shown by the chart below. 

We are 7 months into the pandemic, but the foreclosures haven't even began, and won't till 2021. Forbearance won't continue forever. What do you make of whats coming down the pipe?

 

Originally posted by @David A. :
Originally posted by @Mike D'Arrigo:

@Danny R. Personally, I would not wait. Prices continue to go up in Indianapolis which will push returns down. You can always find some reason to wait but we're now 7 mths in to the pandemic and have seen minimal effects on real estate. Median home prices are up 11.5% year to date and 16.9% in September YOY. There is less than 1 month of supply of inventory so prices will continue to rise for the unseen future. Indianapolis has a strong, diverse economy. Since the pandemic, their unemployment rate is lower than the national average. They have lost fewer jobs than any other popular investment market shown by the chart below. 

We are 7 months into the pandemic, but the foreclosures haven't even began, and won't till 2021. Forbearance won't continue forever. What do you make of whats coming down the pipe?

David, we have to put this in perspective. I don't see a huge wave of foreclosures coming--nothing like the 2008 housing crisis anyways. By 2010, 9.3% of all mortgages were delinquent and 21% of subprime loans were delinquent. Currently, 7.1% of mortgages are delinquent but that number is not rising. In fact it's down slightly from May. The big difference between delinquencies today and in 2008 is the forbearance provision of the CARES Act which is applicable to all government backed loans which account for 70% of all loans. Forbearance allows the home owner to suspend payments for 180 days and can be extended another 180 days. That is a whole year. The economy is opening up and unemployment is steadily declining. In April, the first month of the shut down, unemployment was 14.7%. It was 7.9% in September. With forbearance, the borrower does not have to make up the delinquent payments once the forbearance period has expired. The mortgage is just extended for the length of the delinquency. Personally, I don't see the sky falling. Also, keep in mind that during the crash of 2008, Indianapolis home values dropped just average 7.7%. Indianapolis has a very stable housing market.

 

I agree with @Mike D'Arrigo we just didn’t see the big dips in 08. Good time all the time.

Side question: how do you buy a vacation home in cash at 21 years old?

Hey - I think now is a fine time to buy. You have to work harder to find a deal though.  The Fed is doing to keep tossing money into the system and forbearance will likely continue well into 2021. 

Feel free to hit me up if I can be helpful.

@Josh C. My parents set me up with a trust. At 21 I had access to it. So, I used 900K at the time to buy 3 properties in Downtown, San Diego. I used to live there, got my masters there. Then I moved away and kept one property vacant for me to use. The rent from the other 2 properties paid for all my costs with that one property but now it's been so long since I've been there and HOA keeps going up, it's now at $964 a month. I'm gonna keep 2 properties there, and sell the vacant one. I've had great tenants there, they've never given me any trouble at all. But renting out the vacant one won't make me as much as it would if I deployed that cash in some other market. Plus California taxes keep going up. They even want to add another 1% tax on the property value to help fund affordable homes. That's like another property tax on top of everything else. I love California but it just doesn't make sense from a business standpoint.

@Nick Giulioni Thank you, I appreciate that. I was just planning on doing some research on the area. I’ve found several deals on Zillow. I have a friend who’s a realtor in the Indianapolis area and I was thinking of going there and meeting with him sometime in the next 3 months. I need to learn about rental occupancy there, are properties rented out quickly or do they sit vacant on the market for a while? I am thinking of going into B neighborhoods. I’m also looking into property management companies in Indianapolis.

Originally posted by @Danny R. :

@Nick Giulioni Thank you, I appreciate that. I was just planning on doing some research on the area. I’ve found several deals on Zillow. I have a friend who’s a realtor in the Indianapolis area and I was thinking of going there and meeting with him sometime in the next 3 months. I need to learn about rental occupancy there, are properties rented out quickly or do they sit vacant on the market for a while? I am thinking of going into B neighborhoods. I’m also looking into property management companies in Indianapolis.

Vacancy is very low (at least for my portfolio). Fee free to hit me up and we can chat. 

Originally posted by @Danny R. :

@Nick Giulioni Thank you, I appreciate that. I was just planning on doing some research on the area. I’ve found several deals on Zillow. I have a friend who’s a realtor in the Indianapolis area and I was thinking of going there and meeting with him sometime in the next 3 months. I need to learn about rental occupancy there, are properties rented out quickly or do they sit vacant on the market for a while? I am thinking of going into B neighborhoods. I’m also looking into property management companies in Indianapolis.

Danny, rental demand is strong for B class properties. You shouldn't have any trouble getting tenants if the property is well maintained and in good shape.

 

Danny,

I'd suggest contactin T&H Realty.  They were very candid, thorough and responsive when I communicated with them as a potential OOS investor.  Didn't end up pursuing a deal with them, but it wasn't about them.  Just my two cents...

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